tv Squawk on the Street CNBC July 3, 2012 9:00am-12:00pm EDT
make sure you join us on thursday. we'll be here. "squawk on the street" is next. >> you have eight seconds. >> eight seconds? ♪ >> bob diamond puts on the walking shoes. good morning. welcome to "squawk on the street." i'm melissa lee with carl quintanilla and david faber. let's look at futures of what will be an abbreviated trading session. equity markets close at 1:00. we are looking at a lower open, at least at this point. the dow looking to lose nine at the open. as for europe, stocks risiing o hopes of easing. across the board, green arrows so far. >> our road map this morning with barclays. bob diamond steps down at ceo succumbing to the mounting pressure and now the coo may
resign, as well. how far is this investigation going to go? >> it is the calm before the storm today with the markets quiet ahead of auto sales this morning. jobs report friday. oil bouncing with brent back above 100 bucks a barrel. >> a quarterly loss for microsoft. writes down almost the entire price of acquisition. will the catalyst of windows 8 and the surface offset the strategy miss? >> friends again? facebook and general motors meets again. is this a start of reconciliation or a new account between the two? >> barclays the big story this morning. bob diamond stepped down. the resignation follows the libor probe. meantime, reports now say the cle chief operating officer may step down, as well. the coo is jerry delmeciar and
conflicts reports of whether he'll stay or go and the times basically says he was briefed on the scandal and did very little to prevent it, although running out of executives to run this thing, david. >> yeah. i don't know. they're going to conduct a search. the outgoing chairman in charge of that search. yesterday at this time we didn't expect that mr. diamond would go. or at least so quickly. it appeared that he was going to try to fight and perhaps testifying in the uk in front of regulators and parliament and -- >> i think he is still scheduled to talk tomorrow. >> giving it back to them strongly. you know, that may still be the case but of course he'll no longer be speaking for barclays as the ceo. he will not be doing that. may be providing information with an ongoing investigation that barclays is only one that settled on so far and he feels perhaps they were unfairly
penalized as a result of having said, okay, we'll take the heat right now. >> right. although the head of the financial services authority in the uk says the next settlement with another bank may come by the end of the year and might not be alone in a few month's time. diamond who we should point out -- would you call him a banking legend? been around a long time. >> a long time. of course, cs, first boston, a strong career. i think, though, he became most notable in the crisis. the financial crisis. ascending to the top of barclays and lehman deal brought them to prominence or the discussion sort to speak here in the states. >> you have to wonder about the investigations still pendining t there. there's news of scandals breaking a few days or a week ago and investigations going on. bankers around the world connected with price fixing of libor who have been fired and
this is going on underneath the surface. you know? even though we might not have known about it here in the press. so that is all going on and you got to wonder about how far the investigation will go in terms of other banks and how far in terms of also heads being lost. sea level ceos stepping down because of this in connection with their own banks throughout. >> there's an element of this where there may have been at least they claim government recognition of what was going on. got to remember at the time in particular, it was important that the markets believed there was or have confidence and may have been saying that their borrowing costs less than they were but in part to at least reflect or try to reflect some confidence overall. >> right. >> remember in the financial crisis we were all talking about libor as a measure of banks ability to borrow from each other every single day. it's improving. maybe things aren't so bad. >> right.
now it may be, in fact -- >> it was fixed. >> unstated as lower than it really was. did the regulators know? something we still don't know about either. >> want to bring in kelly evans in london following the upheavel. watching fireworks here and could see fireworks of another kind where you are tomorrow. >> reporter: yeah. carl, absolutely. we are going to see bob diamond despite stepping down as ceo of barclays he will appear before the treasury select committee in parliament tomorrow and should be about this time and just 24 hours from now. so there are going to be a lot of questions of what they grill him on, what he says about the extent to which there were conversations between barclays and uk regulators, importantly. including the bank of england regarding what was happening in libor. this is a rate watched by global financial participants in the crisis. it's a rate if you take out the
credit card statement or mortgage statement, look at the fine print and your lending rate may be keyed off libor. overnight there were reports that bob diamond perhaps might come forward and say we flagged these concerns years ago. onus on regulators now but it's a complicated issue, a question of what happens to a 30-year mortgage priced off libor if regulators want to phase that out. look at the share price behind me. barclays up 3.4% this in the wake of the news of resignation and possibly a top lieutenant stepping down, as well. investors seeing value here hearing this morning and think after the selloff last week, still one of the stronger uk banks, perhaps there's an opportunity. >> kelly, i'm wondering with the focus on barclays' executives at the same time should somebody start investigating the bank of england or other central bankers
who might have known what was going on, especially in the financial crisis coming to libor? >> reporter: there are -- the bbc reporting talks between, for example, paul tucker at the bank of england and barclays back in the crisis in 2008 that apparently gave barclays the impression regulators were aware of what was going on and not doing anything to stop it and may have left them with an impression of an okay thing to do. for example, to promote financial stability at the expense of maybe transparency of what some of the borrowing costs were so if rates not as high as the crisis was true interbank lending rates higher, what effect that would have had on the global financial system is something people are still working through. >> kelly, thanks so much for that. kelly evans from london. we should note the stock market set to close at 1:00 p.m. eastern time ahead of tomorrow's fourth of july holiday. factory orders due to be out today one day after
manufacturing activity shrank for the first time in about three years. on thursday, the watch will be on to see if the european central bank will cut interest rates as expected and of course the june jobs report front and center on friday. so certainly a lot to look forward to but today in the markets could be a little strange. could be a whippy with the light volume. a lot of people exited, gone to the beach, et cetera. >> and a lot more going. >> including you. >> yes. >> and you. >> yourself. >> i'm happy to be with you for the next -- let's see, an hour and 48 minutes. >> and counting. >> leading up to the jobs number on friday. harris bank, jack earlier yesterday said if you look at philly fed and do a regression analysis and pretty spot-on in terms of forecasting jobs, philly fed is suggesting 43k. which could be -- >> oh. >> -- half consensus. >> 90 is consensus right now. >> we know what ism said
yesterday and new orders. chrysler at 20% year over year. all five brands up and seeing what gm says and we know what ford said about international business not too long ago. >> that's the trick. >> in particular europe. let's not forget about europe, of course. they don't have a shortened holiday week over there. and we'll see. you know, yesterday, of course, the news in terms of france, gdp or debt to gdp in that country going to grow and fairly significant unless they make significant budget cuts. just wondering how much that creeps in and how much we creep back from what appeared to have been accomplished, if you will, at the summit in terms of what merkle was willing to allow. you know, that's not written down yet. and we'll see. but one has to wonder when europe will reemerge as a concern. it's not as though they've fixed it. >> let's get what to expect in the shortened holiday week. david is chief market analyst and manager at limo s.e.a.l.s.
>> good morning. >> good morning, david. >> my pleasure. >> and a holiday. how are you setting up for the rest of the week at this point? >> i think we got a pretty difficult number yesterday with the ism manufacturing index below 50, albeit barely below 30. when it breaks the 50 barrier, on the downside, you look over the next one to three months and the market is generally flat to slightly lower. that to me confirms what we have talked about in the last few weeks, that you have got more headwinds for the market whether it's europe, whether it's china slowing. whether it's this pending problems with the fiscal cliff and the expiration of the tax cuts. yesterday's ism index confirmed yet again markets got headwinds in the new term before easing gives it a tailwind later this year. >> are you expecting fed easing come the august meeting? let's extrapolate off the ism
number and for the jobs report, does it not have to be as bad for the fed to engage in easing? are you in the camp where you believe the fed has to do something in august to do something before the elections? >> i think it's that the fed has continue to be accommodative. if that's interpreted as easing then it's easing and more reserves in to the system. bank loan growth has been accelerating and in fact i'm thinking that jpmorgan at seven times growing for the hair on it, i think it represents a buying opportunity for the patient investor. i think lower interest rates and a continued low interest rates will prove positive to some of the financial institutions and the fed will have to keep rates low and put more reserves in to the banking system. >> david, people love to beat up on analysts. i was looking at the survey of sell side analyst of b of a does. the indicator. shows that they're the most bearish they have been in about 15 years. and people like to use that as a
contrarian indicator. is it possible they're wrong? >> carl, i always think as a contrarian you make your most money running against the herd and sentiment is high. individuals at some of the most bearish points in the last ten years for the expectations on stocks. the equity risk premium is quite high relative to bond yields. i think that is a great story because it tells me that over the next two or three years we do have the potential that stock returns can still get us between 7% and 9% in that type of environment. when sentiment is so washed out that gets me more positive for that negative septemberment just near term headwinds from the ism index. >> i have to ask about jpmorgan. >> yes. >> see how the libor price fixing scandal unfolded and bob diamond stepped down, is it concern of spreading to that bank, as well?
>> with jpmorgan as i mentioned, here's where the positives are. the securities business is growing. commercial banking is growing. asset management is growing. mortgage businesses is continuing to grow as is the credit card business. all of that ultimately will overwhelm the headlines of the big whale trade whether it's a $2 billion loss or something larger than that. at a dividend yield, twice that of the u.s. treasure. >> but can it outweigh the big whale trade plus involvement in libor fixing? >> i think it can. >> okay. >> it's value to the investor along with maybe safer names like mylin labs and revenue growth at others. i think it oes time for the patient investor to be buying dividend-growing stocks and the names fit that mold. >> david, good to speak with you. >> my pleasure. >> happy fourth. shares of microsoft falling in the premarket. the giant taking a $6.2 billion
noncash charge to write down the value of an acquisition of 2007. it bought aquantive. microsoft was hoping it to counter google's buyout of double click. at the time, the biggest acquisition made to date and discussion today about whether or not it was a reactionary move to double click. maybe too late to get in on the online marketing. >> paid a huge premium, too. i think at least 85%, i remember that day. we were like, what's aquantive and read it and couldn't figure out what it meant. 2,600 employees. as you point out, there was a bit of a fad and wanted to follow on the double click acquisition and for many accounts it was good for google. we're talking about goodwill. this is a company especially all goodwill and you have to write it down because it's not there
in terms of the actual value and noncash for microsoft but nonetheless a black eye, if you will, for yet another acquisition for this company that did not work. >> right. online services one of the biggest drags in terms of microsoft's business. but at this point, you know, with microsoft having broken out pretty much this year, made the big run after a decade-long slumber, it's got the catalyst potentially of windows 8 and surface tab wills ate you have to wonder if it's rear-view mirror. it's a mark against them but. >> they've been aggressive. they bought skype. see how that works out. of course, in between this and that was the yahoo! failed acquisition and one they're probably happy they didn't make and reached the deal with yahoo!. nonetheless, a deal in 2007 and write off in five years, not way you want it to did. >> no, no. general motors and facebook appear to believe in the process
of reviving their relationship. "the wall street journal" says they're in talks. back in may a gm executive said they had little impact and would stop advertising on the site and came a few days before facebook's ipo an really questioning whether or not facebook can prove effective and whether or not they have the me believes to prove they're effective. >> it's adata that's the sticking point. the report says that facebook is not going to give gm special treatment but going to supply them with enhanced data to say you are getting bang for the buck and the best read is that gm is considering it, not committed but definitely interested in getting some better numbers on their return. >> you have to wonder if there's an element of symbolism in going after gm and trying to get them back. the journal's reporting that sandburg called the ceo of gm herself to try to reconsider the relationship so could this be
some more damage control and what would be a very watched earnings report of july 26th after the close. >> isn't it something to be announcing a switch of exchanges and a gm contract on the same day? >> exactly. that could be a huge catalyst for the stock. >> we'll see. still to come on this tuesday morning, the company behind jimmy dean sausages and ballpark franks. emerging from sara lee in time for the fourth of july. we'll talk live to the ceo ringing the opening bell and given us very nice grill tongs and a chef's hat which melissa will put on. >> that's later on. >> futures looking to open down modestly today. [ male announcer ] before you take it on your road trip... we take it on ours. this summer put your family in an exceptionally engineered mercedes-benz now for an exceptional price during the summer event. but hurry, this offer ends july 31st.
want want to get some headlines out from research in motion this morning. dow jones citing an interview with cbc radio says the ceo is saying that the company is not in a death spiral. there's nothing wrong with the company as it exists right now. the company's in the middle of a transition. it will emerge from the transition successfully. again, these are remarks made by the ceo to cbc radio as quoted by dow jones premarket. shares down 1.2% and never good to have to deny that a company is in a death spiral. >> saw the quarter recently with the huge delay. the delay of the blackberry 10.
interesting call yesterday. we had him on in the 11:00 hour. upping to a buy. based on speculation about purchase, $10 price target and said even if it's bought, even if the company agrees to be bought whoever buys it would likely quit production of the 10 because it is so far behind. just -- >> he raised the rating on research in motion because of speculation of a takeover? >> as he said to us, there's a lot that could go wrong with the call. >> you think? >> there's a time to sell these companies and rim may have missed that opportunity. the bankers trying to move them down the road to consider it but selling off of a $7 stock price it is difficult and the ceo saying we're not in a death spiral it is difficult to have an acquirer step in. whereas motorola mobility, here's carl icahn. that was the time to be sold and it would be nowhere what google
paid for the that company. rim's day to sell may have passed because they thought they could affect a turnaround. >> there's still options for rim in terms of what it does with the network and opens the network up. but again it's all about whether or not the ceo is willing to recognize that the company is at that point where they have to explore the options as opposed to go it alone and sounds like he says there's nothing wrong. >> and ip may be significant, as well. >> all right. keeping an eye on that. meanwhile, tomorrow marks the 2367th birthday of this country. the united states of america when the declaration of independence was adopted in 1776. brings us to this morning's squawk on the tweet. what would you get your country for the 236th birthday? that's a lot of spankings. >> i was thinking candles. >> candles. get your responses throughout the morning. all right. coming up, a live interview with international monetary fund chief about the imf's annual report on the u.s. economy.
that's in about two hours from now. also ahead, online travel stocks behaving like fireworks. the best way to ride this rally. take a look at futures as we approach the open of what will be a holiday shortened trading session. we are looking to lose at the open on the s&p and the dow. i don't spend money on gasoline.
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holiday-shortened holiday and week? >> this is not a surprise of an extension of friday's rally. i think what's more important to note is one of the sectors that's an underperform which is the oil sector led us the last three or four days so i would continue to look at that, especially what's going on overseas. >> the price action yesterday despite ism number decent considering we rallied from lows yesterday and it was an extension of friday's big gain. >> absolutely. what's important to note is again that people weren't looking for that number we weren't surprised by it and able to fight it off and rally over the course of the day. had a strong close. today, anticipate not much action but holding a decent flat line, you know, that could bode well for thursday. >> last chances for american investors to trade ahead of ecb on thursday. a lot of discussion of dragge. >> right. >> if he cuts on thursday, is that a sign that maybe europe is going to tap the gas?
>> yeah. you know what? i think it's so hard for us to understand what's going on. we weren't expecting much out of them last week. not a surprise boost. i don't anticipate the market rallying too much on it. this is a long way from ending so, you know, might be time to reasonably look at what's going on and maybe tap the gas and provide something for them going forward. >> all right. thank you. opening bell after a short break. th of our cells plays a key role
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trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. ♪ ♪ trading day begins here at the big board. hilshire brands celebrating the spinoff of the sara lee brand. providing entertainment to the veterans and troops. nice touch ahead of the july fourth holiday. here at the open, matt cheslock said flat would be the new up. being flat today is a good sign for the markets. and so far, we're flat. >> yes. one thing we've not discussed is jpmorgan today.
we talked a bit about it relative to other banks but the story in "the new york times" looking at documents and deciding that financial advisers, some by their own admission, sold products of the companies not just others, a practice that, of course, is not unheard of. favorite quote, financial adviser on the business card and not what jpmorgan let me be. >> "the new york times" devoted a lot of column inches to jpmorgan i think it's fair to say in a lot of different ways and probably will continue to do so in the future. >> i mean, the problem here is that a financial adviser should add in the fiduciary interest of their client so regardless of the product it is, whether it's jpmorgan product or a competitor's product, they have the duty to suggest and recommend the best product for that particular client so there's -- >> does anybody believe they do that? >> that's the thing. i don't know if you think that's what happens. >> i hope most people dealing
with a -- you know, aware of where they're recommending their own product and when they're not an should be pushed to do just that. but one would anticipate that they might have perhaps certain incentives to keep you in house. >> yeah. a lot of searches, obviously, today about u.s. manufacturing after the ism number yesterday and what ford and nike and harley said in recently days. boeing upping the estimate of jet sales. granted, 20 years. 34,000 airliners over the next 20 years, that's $4 trillion in business driven largely by two things. intra-latin america traffic and a lot of middle eastern traffic, especially emirates, for instance, using dubai has a hub to europe. >> a lot of that narrow body. having listened to phil lebeau earlier and the dreamliner figures in to that and asia is a lot of demand as you said.
>> ford sales at 7% versus 4.4% which was the estimate given by edmonds and seeing the stock pop on the back of that, higher right now by 1.8%. carl mentioned chrysler came in with pretty strong numbers, as well, earlier this morning and watching for gm but those shares are higher by 1% right now. >> i want to -- are we going do go to phil now? >> yeah. phil lebeau has more on this. phil? >> reporter: what's important to point out with the numbers of ford slightly better than expected and volkswagen reporting a 35% increase, the best first half of the year since 1973 for volkswagen here in the u.s. these numbers along with what we saw earlier of nissan and chrysler which are slightly ahead of estimates looks like we could see a pace of greater than 14 million and that's the key benchmark, guys. below 14 million substantially, we would likely see people bring down the full-year sales
estimates. overall they have confidence we're finishing the year at 14.3 to 14.5 million. general motors in the morning conference call said this morning their expectation for the month for the industry to be over 14 million. we'll be talking with general no to recalls the top of next hour and again all of the numbers slightly above estimate. >> phil, is there still a sense that there is some slowing overall, not just for the month but from q1? >> reporter: yes, yes. that's why nobody is -- they're still cautious, carl, about saying exactly where they think the end of the year is going to be. they knew we would slow down the middle of the year and combining housing, jobs and consumer confidence and that's the key, carl. that's the number one predictor if you will of what we see with auto sales, that dropping spooked a lot of people in detroit and for the other automakers, as well. >> lowest michigan number for the year so far. thankses, phil. coming to you later looking for gm, too.
you're watching duke. >> duke energy having completed an acquisition announced back in early 2011. that of progress energy. it was about a $13.7 billion deal. there's a look. but interesting social issue here that has come up. when the deal was announced back again in january of 2011, bill johnson who was chairman, president and ceo of progress energy was supposed to be the ceo of the combination. in fact, it said as much. jim rogers would become the chairman essentially. executive chairman. but johnson will become president and ceo of the new company. fast forward now. 18 months. of course, a lot of regulatory hurdles to get through and mr. johnson is leaving, resigning. there's rogers. he will be the ceo. stays president and ceo of the combined company and mr. johnson is out. no reason given other than he
didn't want the job or the board apparently didn't want him for it. don't know what exactly is behind that. worth noting. a large deal having closed without what was supposed to have been the executive alignment when it was announced. >> mary thompson on new york stock exchange with what's moving. >> we are seeing weakness in the opening moments here of the trade on a shortened holiday session. the new york stock exchange closing at 1:00 eastern today. the dow off 20. s&p off a point and a quarter and nasdaq that popped earlier retreated off two points. seeing weakness in retailers, banking stocks and drug stocks and today's session. watching in focus for traders are the june auto sales numbers. you heard phil saying gm expects the industry with better than expected numbers in excess of 14 million. it's not giving much of a lift to shares right now. also in focus today seeing
strength is in the commodities sector both in the stocks and commodities themselves. expectations rising for a global stimulus and giving a lift to the crb index trading at a six-week high a little bit before or earlier today. helped in part by copper and trading close to a six-week high and gains in gold and oil, as well, today. giving a lift to material stocks, adds well. watching them to see if they can maintain their hold on those gains. auto stocks in focus. gm's numbers still to be reported. ford coming in with better than expected numbers. we are also watching, of course, the european banks in the wake of the barclays company's ceo bob diamond stepping down. following this story for a week. he is the latest executive. the chairman stepping down and then coming back to lead the search for a new ceo. those stocks mixed in today's session. and i don't want to spend anymore time on duke because david just covered it.
we have the dow paring some of the earlier losses down 10 points. back the you. >> thank you so much. rick santelli in chicago. already had australia keep rates unchanged. rick, good morning. >> good morning. absolutely. i tell you. i think it's fascinating. i like watching the aussie dollar versus the u.s. greenback and some of the grain markets, maybe even livestock bucking the strong dollar, maybe less accommodation move that we have seen in commodities add in slow global demand. but we do see that grains have broken out of that. well, that brings me to my point. the aussie dollar is in many ways a proxy for a commodity and i want to pay close to attention to that. as you pointed out many times, the ecb meets on thursday. that will be a factor. i liked the motion that ireland coming to the market with bills in a couple of days.
anything can heal. think russian default. as for the markets, a chart of r-10s, listen, i write down the rates about every 15 minutes. we moved a basis point in 10s in the last hour and not looking at a lot of volatility, early closes, i think the issue today is many traders are trying to get the final tweaks to their position in front of what will be probably a much weaker than expected at least in my opinion jobs report. whether it's adp without the government or the bls with the government, and it's going to be a big driver. it will be the dynamic to trade through all month. do i have proof of that? one chart we had and still in a range really since the last unemployment number which was 69,000, put in the historic low yield of 145 in a 10 and it is about jobs and it's about jobs because it's about growth and it's about growth because all's we do is create debt. i don't see how much is going to
change today but boy getting toward the end of the session we want to watch to see how the equity markets put in the final trades. melissa lee, back to you. >> rick santelli, thank you. let's check out energy and metals. sharon at the nymex and pretty big moves in wti and brent today. >> reporter: big moves. brent crude above $100 a barrel and wti near the highs of the session topping $87 a barrel. $3 move in both oil contracts and, of course, a lot of it has to do with tensions in iran. reports of missile tests. of course, reports of a draft bill to perhaps close shipping in the strait of hormuz. all of the factors, the rhetoric is definitely increasing and the sentiment has changed here, traders say, from the focus on europe to the focus on iran. we knew that this oil embargo on july 1st. now it's in place and now we are hearing iran's reaction. and that traders say is the reason why there's no way they want to be short going in to this holiday and, of course, we
do have regular trading hours here at the nymex for crude oil's futures and options. we are also watching of course what happens to the gold market and we are looking at gold prices that also are rallying here. the fact that the ecb could potentially cut rates, that is something that traders are watching for, for a potential to happen on thursday. that is one of the reasons why they say that they're aboutively buying gold. and again, the gold futures market open until the normal closing time of 1:30. we will have electronic trading until 5:15 and reopening tomorrow at 6:00. it will be an active probably trading session for those involved tomorrow evening, as well. back to you. >> all right. thanks very much, sharon. well, you know what? if things weren't so bad for the banks and lack of a transparency, coming to the actual business at least in investment banking we can look back at the first half and, well, you kind of know the story, don't you?
not a particularly good one when it comes to underwriting equity and debt and advising on mergers and acquisitions. there's global m&a volume. you have to go back quite a ways. first half of '09 for a first half that's not as good. targeted m&a volume is a sense and not just the numbers themselves but it's the expectations in coming in to this year which really were quite strong. in terms of what we would see. we have seen some deals. in fact, yesterday we saw some activity but it's been relatively small. relatively quiet all along. and nobody expects that the second half of this year's going to look much different than that first half given the presidential election, given fiscal cliff. continued concerns about europe. and the like. and when it comes to other areas, as well, equity capital markets, we got the facebook ipo in may. you know what?
wasn't the greatest first half there either. year over year for 2011 or even if you go back to 2009. you can see it there listed. ipos. gives you a sense of what we're talking about. and overall debt capital markets and even high yield bonds just to -- this is the bright spot of course. fixed income in the first quarter of this year quite strong. that's where a lot of banks continue to make money. comp come down sharply given higher capital ratios but nonetheless fixed income is one area where the banks at least had been able to generate significant profits. we'll see but again a first half that was less than stellar. melissa? >> all right. coming up, what the future holds for companies spun off of sara lee and speaking with the ceo of hillshire brands. as we head to break, take a look at the morning's early movers. on wall street on this tuesday. u.s. steel up 3.6%. stay tuned.
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brands celebrating the spinoff of sara lee. the ceo joins us this morning. congratulations on the big day. >> big day. we're excited to be here. >> big business, too. 4 billion in sales. everybody talks about pressure from generics, pressure from the tysons and krafts of the world. when's the competitive outlook look like for you. >> we're a $4 billion company so we have scale and the right size to be fast and agile and with the portfolio of brands we're confident to drive shareholder return in the coming years. >> commodity returns ease or get worse? >> commodities are moving all around and in the process of finalizing plans for next year and back with shareholders in august to share specific guidance on the year. >> help us to interpret rising corn prices. the hog farmers returns are diminished. will that directly impact you?
how can we understand what you're paying for pork as it relates to corn prices now. >> what you have seen is you have seen commodities move both directions and seeing it shake out. we are in the process of analyzing the inputs to the total cost base and assess where we will be on the full year and provided and factored in to the guidance. >> not paying more for pigs in the fourth quarter. >> not yet. >> not yet. okay. bernstein said recently a takeover in the words would be fairly likely noting that tyson and hormel on top. you just start trading, tough thing to hear. >> not appropriate for me to comment on market speculation like that but with confidence i can tell you that the management team has a strong conviction to generate significant share holders and independent public xhaen with the brands we have got and renewed focus on innovation. >> talking about innovation and mentioned couple of times and say you're meat sen trick and more innovative, what does that
mean? >> what it means, the best way to look at it is look at jimmy dean case study. it was a rolled sausage business and in 2000 reframed it to be protein breakfast and by reframing it, we had a decade of explosive growth in terms of innovation and got in to sandwiches and most recently breakfast caquesadillas. >> barclays chief operating officer resigned so it's expected. comes on the heels of ceo bob diamond resigning top post and yesterday the chairman resigning so the third resignation at the top of barclays coming down moments ago. >> statement reads in part the 15 years of barclays is a time of great accomplishment for me and the bank. the firm as strong today as it has been. incredibly well placed to succeed in the landscape. >> okay. we'll continue to follow the
story. meantime, we continue with sean connelly. taking a look at various other food companies, premiums are demanded for organic. is there a thought to go there? >> we have a clear mandate to understand consumer seg menation in general. there's a mainstream consumer and a wellness consumer, increasingly that looks more and more like organic. we call it clean label. there's a distinct market for those kinds of products. that led us to buy the adells business, an antibiotic clean, premium label sausage and the most expensive product and fastest growing product. >> mcdonald's recently changed the way they source some pork. trying to change the dynamics in which the cow or pork is raised s. that key for consumers? do they care about how the hogs spend their lives or all about the actual ingredients? >> it is key to a certain segment of consumers.
responsibility is key to the company. it is one of the key strategic planks and something we take pride in and manufacturing facilities acknowledged in the industry for great practices. >> is the fourth seasonally a high point for sales? >> this weekend 150 million hot dogs consumed in the u.s. and a big weekend for us. >> only 150 million? that's it, huh? >> you know, if you want, there's available on the shelf and add to it on the way home. >> thanks. thanks for the tip. >> i have done my share this summer. finally, there is actually a hillshire farm or there was. >> absolutely. new london, wisconsin. i have been there. beautiful setting. it is the home of our hillshire brand equity and where the story was built and a story about extreme quality and craftsmanship in meats and chose hillshire for the name of the overall company. >> is it like a museum? >> it's a farm. >> is it now a working farm? >> absolutely. throw some sausage on the grill
and came out of new london, wisconsin. >> at the grill. >> david, are you in? >> sure. like to see you milk a cow or something. >> i don't want to clean the pork or the hog pen. that's it. >> no. >> hogs are -- wow. congratulations again. >> thanks. good to be here. >> coming up, what would you get the u.s. for its 236th birthday? tweet us. we'll get your answers straight ahead. take one more look at the s&p. biggest losers and home depot leading that list and lowe's.
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market's holding on to slight gains and lowe's and home depot stands out. home depot and lowe's. there's a note out of cleveland research, a channel checking firm, saying that they see softer june sales suggesting that home depot and lowe's likely running behind in second quarter comps to this point. they do appear to be a little bit more negative on lowe's here. in terms of what they're going
through in the slowdown and seeing, the inventory builds there, so we're seeing both of those shares under pressure in today's session. much more so than the rest of the markets. all right. coming up, raymond james chief investment strategist jeffrey saut. keep it right here. the global ready one ? yeah, but you won't need... ♪ hajimemashite. hajimemashite. hajimemashite. you guys like football ? thank you so much. i'm stoked. you stoked ? totally. ... and he says, "under the mattress." souse le matelas. ( laughter ) why's the new guy sending me emails from paris ? paris, france ? verizon's 4g lte devices are global-ready. plus, global data for just $25. only from verizon. and so too is the summer event. now get an incredible offer on the powerful, efficient c250 sport sedan
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welcome back to "squawk on the street." may factory orders ready to come out and here we go. up .7 on factory orders. much, much better than the kind of unchanged up .2 we were looking for. one minor fly in the ointment. last month down .6 and now down 7. this is kind of interesting, actually, because if the number is negative it's three negatives in a row. we haven't had three negative month over month changes on factory orders since the first three months of '09 and after yesterday's kind of tag to history weakness numbers in ways i thinkfeeli ining gun shy about this number. markets are a bit quiet but
nervous to some extent because, of course, this holiday's smack in the middle of what will be two days of major jobs reports and we all know that those seem to move the markets the most and if you don't believe me, look at the last jobs report and the yield on a 10-year as historic 145 close. carl, back to you. >> wow. thanks so much, rick. see you in a little bit. getting gm's numbers out. for that, phil lebeau. phil? >> reporter: karl, the numbers show they're better than expected. an increase of 15.5% in june sales. the street was expecting an increase of 8%. for more perspective on what was driving sales in june and especially talking about this fleet sales and delivery number. bring in curt mcneil of gm headquarters in detroit, michigan. vp of sales for united states. curt, break down the numbers if you will because it looks like what gm is reporting with all the other automakers is slightly better than expectations. >> yeah, phil. we obviously feel very good
about being up 16%. it was our best sales month since september of 2008. and probably what we're really most excited about is all of our sales divisions were up double digits for june, so obviously, very positive. >> but, cukurt, your retail sal up just 16%, not disappointing but relative to the fleet deliveries of 36%. but are you confident with what you're seeing with the retail buyer, the person going in to the showrooms? >> we are. to your point, you know, our fleet numbers still for the year were pegging at about 25, 26% of our total business. so that is our plan. it will ebb and flow every month but we're still holding firm to that. you know, there's a number of factors out there. obviously, the jobs data isn't necessarily very positive.
consumer sentiment is challenging. however, the housing data has been up a little bit. gas prices are helping and the availability of consumer credit is good. so, you know, we see headwinds out there but at the same time, you know, continued moderate growth. >> so paint a picture for the rest of the summer. are you expecting auto sales and an economy to sort of trudge higher or do you think we're still in a period here where for the next few months seeing things traend bit lower? >> once again, i think the headwinds will continue but having said that we do see moderate growth. i mean, in our case, we're very excited. we got a tremendous portfolio coming, whether it's spark, the all new malibu. we have new mid-sized crossovers, new buick encore, cadillac with a new stx, atx.
the products are going to be positive for us and for the industry. >> kurt mcneil, the vp of sales for the united states of general motors joining us when, carl, reported better than expected sales of june and one last thing, carl, if you don't think that sales move in relationship to gas prices, simply look at the crossover sales of general motors in the month of june, up 30% for all of the crossovers. clearly, a rotation in to those vehicles as people said, well, listen. gas prices come down. maybe i can ford something with more space. >> interesting. good numbers of gm. good numbers of ford. good numbers of factory numbers. then verse of yesterday. thanks a lot, phil. we have another dose of breaking newless here. the imf report on the u.s. economy is out. steve liesman is breaking it down. >> thanks very much. the imf with the annual report on the united states saying the recovery is tepid. strong headwinds persist and households delever. growth is likely to be modest over two years and predicting 2%
growth bumping up to 3% in 2014. the forecast risk the imf says is tilted to the downside. they're weighing in on the deficit debate in the united states saying to pursue immediate-term debt reduction and not endanger the current recovery of debt reduction measures right now and critical the imf says for the u.s. to move the fiscal cliff of uncertainty and solve the defic deficit. weighing in on a dicey political issue here in the united states. also saying the u.s. should use -- calling the fed's monetary policy appropriate and saying that the federal reserve has further room to ease. melissa? >> thank you very much, steve liesman. >> sure. all right. a lot of breaking newer hoos at the top of the show. want to get to the road map for the next hour. bob diamond is stepping down as barclays ceo bowing to investor pressure amid the libor fixing
scandal. what's next for the ailing bank? research in motion ceo saying that the blackberry maker is not in a death spiral but layoffs loom, sales falter and delays persist. plus, in honor of the fourth, first-half high flierses of priceline and expedia. is there still more room to run in the second half? well, want to turn to the fall yacht of barclays rate fixing scandal. the ceo has you just heard and the coo announcing resignations today. the outgoing chairman who announced departure yesterday leading the search for a new ceo. what's next for banks that's losing, well, almost all of the top leaders? chief executive leadership institute ceo, yale senior associate dean and cnbc contributor joins us now.
take me inside a bank of ceo, coo and chairman about or have already left. how do you deal with that situation as the board of directors? >> clearly been taken in to receivership by the board of directors and even the chairman of the board of directors himself is now on a short-term notice that he's -- as you just said is on his way out so it's astounding the stock is up. i know there's some analysts hearing this. i think just about everybody that i know in the leadership role in the financial community is stunned by this. this might be the right answer to have come to this conclusion but this is a little premature now. it's smacks of a political and public relations effort to throw a body under the bus and unpopular body in the uk for various reasons but we have investigations going on. we have a full parliamentary investigation yet to continue and david cameron spoken out on
this. the special fraud office wants to investigate. all these folks firing are going to have to testify. you don't know why to make hostile witnesses of the leaders but also where's the evidence against them? >> yeah. i mean -- >> where's the due process? >> right. jeffrey, you raise a good point. i don't remember, i don't know, can you, seeing the entire senior executive departure of this type? i mean, at a major institution. one doesn't come to mind for me. >> absolutely. i can't think of anything. there are times where -- i don't want to dredge up ancient history going back over just a decade? >> that's what you have to -- yeah. that's what you have to go to. >> fannie and freddie and in each one of the cases we saw them put in knowingly soiled executives just for continuity at freddie mac, they put in there after they cleared everybody out had mud on his
shoes and they just said, we don't know how else to run the ship so you have seen in those cases enron, worldcom, put them in who were troubled. so, this is a problem and i don't want to be inflammatory here but there certainly are some people despite walmart's 50th anniversary and the soaring stock price, the spectacular performance in so many ways, if "the new york times" report, of course, was accurate on the complicity of people at the most senior levels, this could be a harbinger of how's that kind of situation handled? because we don't see a whole cohort of leaders clear out like this generally. >> right. to that point, jeff, given so many departures, is it better -- one can see the argument of somebody outside to lead the company given its involvement in the alleged involvement in the price fixing scandal at the same time three leaders out.
what's best from the shareholder perspective? >> they're very good people in here. as you cascade down the line, i think there are great people. but i think it's unlikely it would be an internal candidate. you see boards with a rush to judgment. we have seen, by the way, mott motoro motorola, jet blue at the time of its founder pushed out too soon. many times the boards go for this search for somebody from the outside. i for one thing that hank greenberg was hustled out too prematurely at aig. patty dunn thrown under the bus. not to get you worked up on that david. >> won't go down that road right now, jeffrey. >> the boards look for a masonic figure, a savior from the outside in a misguided effort thinking that the cameras go away. the investigations continue. it's not going to take off the government, the media and the financial industry pressure on when's going on here and the
libor issue, if there's a price fixing issue and suggested here, it's a much larger issue. >> clearly, jeffrey, the board is doing one would assume what it feels it has to do and perhaps knows more than we do in terms of what they're hearing from government officials and regulators. i mean, would you agree with that or -- yeah. you like to believe that. yeah? >> you like to believe that but to this day nobody that we could put on the show could tell us that the siemens board didn't act prematurely. he's very successful as the ceo as alcoa in difficult times and yet he's led, you know, a great personal and corporate resilience. look at that. you can say well the board must have known something we don't know. six years later we still don't know it. david neilman at jetblu. at the gap. sometimes boards act
prematurely. a lot of times boards act in panic. at motorola, the razr phone coming out late, a huge success. with wilting criticism of "the wall street journal" coming out they panicked and pushed him out. a lot of times boards don't know more than we do and don't use what they do know. and not saying diamond is necessarily clear. we don't know he's done anything wrong. he's a wildly admired ceo. what he's done in the u.s. for them is mentioned on this show and what he's done for them in africa. yeah, sometimes pitfalled moving in to investment banking but there have been a lot of successes. his compensation's been high. there's been tax issues and, of course, british regulators don't like him and u.s. born. i don't know. it's cultural or political thing or, in fact, there's something we don't know. but we certainly don't see anything out there. investigations are yet to follow. a person -- >> how much time would you have given him, jeff?
>> i would give him until the investigations show us something. >> weeks, months? >> as you know, when it came to bp with tony hayward or lord brown or whomever, brian dunn at best buy, i'm not calling for ceo ousters but ceos are entitled to due process and the reputations -- i hate seeing this happen to somebody, go out with tin cans tied to the tail with no known complicity in the problem. >> right. well, again, we don't know exactly. and certainly, there are plenty of e-mails to show otherwise. jeffrey sonnen feld -- >> could be. >> thank you for your insights. appreciate it. want to go back out to phil lebeau with the news of toyota this morning. >> reporter: reporting sales slight he below estimate of june and just over 60%, the street expecting an increase of 66%. a huge number and people say what a great increase. remember, still coming off of comparisons of last year when the tsunami and the after effects to the supply chain
meant there's few vehicles in the toyota showrooms last year. looking at the june numbers of toyota is may and down more than 10% and part of the headwinds to talk about, how much softness in the market. we heard gm talk about it. that's the real theme throughout the day for the auto sales. >> all right. phil, thanks a lot. a businessman on this tuesday morning. travel stocks priceline and expedia seeing big gains the first half of the year, both soaring over 45% as we gear up for the holiday shortened week and kick off the new quarter, is there more room to run for some of these high flyers? ♪ ♪ ♪ ♪
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online online travel names priceline and expedia, a few of the topper formers for the first half of the year. is there more room to run? jake fuller is analyst at lazard capital markets. both have downgraded the shares recently. andre, i'll start off with you. in terms of thinking of priceline and expedia, they're both very exposed the europe and as we get more and more data points of various companies of slowing sales out of europe, should we be more more and more concerned for priceline and expedia? >> good morning. we have not downgraded either of the shares. >> our apologies. >> no problem. actually, so europe is the big question, and what we're seeing is that the european travelers
is still there. so, both data points from str global are showing that dars and occupancy rates are holding up and from anecdotal checks we have done ourselves, the european traveler may be taking shorter trips in distant and not flying there but still making the hotel stays and that's the key since both in their european businesses focused on the hotel side so that seems to be holding up for both of them. >> do they make more money with the hotel side? >> yes. there's a bigger cut. usually a fee of $5 or $10 and the hotel side is a take rate of 15% to 20% of the room rates and room rates are involved here. >> all right. jake, you did downgrade expedia back in june you had a few components to it and part of it was fx with the winds in the exposure. have your channel checks indicated the same thing as
andre's? >> our downgrade is really driven by a view that expectations had gotten aggressive. my data showing the business is slowing down a little bit. i think their margins coming under pressure and not because of europe. i'm, in fact, seeing in the short term that european trends held up. you have to keep something in mind here. travel is a lagging economic indicator. not a leading one. if indeed the weakness in europe continues to gain steam, we'll see it show up in travel. it will be in the back half of the year so the concern for priceline which has more exposure is more a 3q or 4q issue and not a 2q issue and priceline will have a strong second quarter. expedia, the weakness more in the u.s. side of the business and not particularly worried about europe today. but in the back half of the year i am. >> so jake, as we progress through the quarter and we approach the quarter end, what sort of data points looking forward to build a case that europe is a problem for priceline? >> yeah.
so among the thing it is see are the overall hotel industry statistics. not seeing weakness i would argue in the statistics. not until we hear them on the call talk about forward-looking booking patterns for 3 k3w and the general sense is we are starting to see on the margins some erosion or deceleration in forward booking patterns but not a lot of public data to look at to see that before the company reports. >> andre, jake indicated that in the united states might be a slowdown and hitting shares of expedia more. are you concerned ant seeing that of that issue, not just europe? but also the u.s. could be slowing. >> well, it's true that in the u.s., for expedia, growing off a much larger base, that is an issue for them. i don't think expedia that's the story for them. they just finished up the platform build after the website of the same thing with hotels.com and looking for more
with expedia and outperform based on is the fact there's -- this company on the cusp of a turnaround really. reacceleration, if you will. seeing improvement in conversion rates and site performance itself, the performance of expedia could actually outweigh any slowing in travel we are seeing in a macro bases. >> all right. thanks so much for your time. happy holidays, jake and andre. >> thank you. >> thank you. well, looking at the travel experiences of your friends, up next, we'll sit down with a founder and ceo of trip pi, a hot new travel start-up based on the method of friend sourcing. we're back if two. [ male announcer ] this is the at&t network. in here, every powerful collaboration is backed by an equally powerful and secure cloud. that cloud is in the network, so it can deliver all the power of the network itself. bringing people together to develop the best ideas -- and providing the apps and computing power to make new ideas real.
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zuckerburg's sister is on the advisory board. j.r. johnson is founder and ceo of trippy and joins us the morning. good morning. >> good morning. >> you have a fascinating history. this is not your first foray. you had a company and sell it to expedia. noncompete expires and do this. how's it different? how does it work? >> it's different now because in the past many companies and many sites built on top of google essentially. when people search for information, they search through google and sites try to seo, optimize for search engine results to drive traffic to them. now the world everything's really given off facebook and seen sites do a good job of it so far in different verticals. spotify is facebook really well to socially cue rate music and new music you might be interested in. zynga built a company for social gaming on top of facebook. trippy.com is setting up to do
that for travel. >> trip adviser, one of the leaders in the space pretty good sized market cap but you don't disclose your number of total users or how big you are relative to them? >> we have not announced numbers yet, no. >> can you give us a sense of what growth is like? parabolic? steady? >> growth is significant. it's growing really well. to put it in perspective, trip adviser's over 12 years old and trippy is just recently launched and if you look at the inspirational product that we have now it's only a few months old but over the few months groet is significant. >> must make a big difference with facebook on your team. how does having randy on the board change things? >> she is fantastic. she not understands social intimately and understands media really well and putting it together for the product as well as getting the product positioned properly talking to folks is instrumental. >> mr. johnson, you know, i noted in your initial comment in
terms of the world used to sort of be on the back of google and you facebook. is that something you anticipate will continue? and as we move to mobile will also be the case? >> i think so. i think it's important, especially when you look at travel. travel's very nuanced and subjective and out there planning the trips, just when you want to think about travel and to been spired, get the information of people you know and trust is really how most of us have done it in the past. whether at a cocktail party or over dinner, hearing about a trip somewhere and inspiring you to take a trip of your own, this is natural but yet it hasn't translated to anybody doing it properly online and that's trippy's setting out to do. the mobiles a the effect is important and just launched the ipad app last week and top ten of the travel apps in the app store and fits in well with the social aspect and visually stimulating trippy is.
we have the beautiful photos around the world and goes so much more beyond that. it's not just looking at pretty photos but utility to plan and book those trips, as well. >> j.r. how will you make money? >> when people actually you go through -- our mantra is from dreaming all the way to doing and ready to go and do something, take that trip, we send you through to one of the online travel agents to book that trip and where we get paid. >> story today in the journal about facebook potentially buying some developers, would you want to be bought by facebook or trade on your own or sell to somebody else? >> at this stage of the game, we are focused on building the product and the right product in the users. we do that right, we'll have options down the road. >> i like the board. that's like parties. >> well, when we set out to put together the advisory board, we wanted people through some -- across different lifestyle segments to help us out. from the tech side, over to moon
frei who's a fantastic mom blogger and mom author now to jason mraz and the green living lifestyle surfer and fantastic muse sirn. all of these folks come together to kind of paint the picture and talking about how nuanced and subjective travel is. you need different personalities around the table to help out. >> j.o. johnson, founder and ceo of trippy, please come back. >> thanks rg carl. >> thank you for your time. research in motion ceo heinz defending the company saying it's not in a death spiral but with looming layoffs and another blackberry 10 delay, is rim avoiding the obvious? we'll talk to a top ranked rim analyst right after this. what do you want? >> glass of water. >> this summer, you're going to need it. so why not carry it in style? here's your chance to win a water bottle signed by the
"squawk on the street" gang. all you have to do is nail the number. if you can guess this friday's nonfarm jobs number it's all yours. tweet us your guess at cnbcsquawkst. oh, yeah. you have to be at least 18 years of age, too. sorry, kid. for all the official rules and details, go to sots,.cnbc.com. you have until 8:29 a.m. this friday morning. >> hey, mikey. need to go to the bathroom? >> now's your chance. "squawk on the street" will be right back. looking for a better place to put your cash? here's one you may not have thought of -- fidelity. now you don't have to go to a bank to get the things you want from a bank, like no-fee atms, all over the world. free checkwriting and mobile deposits. now depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account.
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♪ about an hour in to trading on this shortened session before the fourth of july. some of the stories squawking this morning about. shares of walmart hitting new 12-year highs surpassing the $70 mark. the stock up 30% from a year ago. different story for jcpenney. the department store fallen 38% in the past 3 months. factory orders of may well above expectations after two months of declines. time now to send it back over to sharon epperson at the nymex. brent is back above 100 a barrel
this morning. sharon, i guess that has to do with the activity in the strait of hormuz. >> reporter: that's right. rhetoric of the strait of hormuz helping oil prices and brent crude prices top $100 a barrel first time since early june. wti prices above $88 a barrel. the tensions of iran and reports they're doing missile testing. that has the market on edge. and this market is on edge ahead, of course, of a holiday where there's no trading tomorrow but a full trading session today. we have seen quite a lot of volatility in the oil market and not only oil that's seen the volatile and copper prices at a six-week high and a belief of the ecb to cut rates on thursday and easing is the hope or expectation of the metals market. gold and silver higher and traders in the gold market looking for gold to perhaps test
the upside of $1640. that's the target for the gold market and we are looking at gold prices up about $20 or so. and at the highest level we have seen in two week's time. melissa, even though the nyse is closing early, traders here are overjoyed for a regular trading session for oil, metals and trading the session in the evening with the electronic trading session resuming 6:00 p.m. tomorrow evening. >> is overjoyed really the right word? >> reporter: can't you see their faces? >> absolutely. >> reporter: they're elated. >> sharon, thank you so much. >> reporter: all right. research in thorn ceo hines saying he's confident that rim gets passed the current challenges. peter meisek joins us now.
peter, just reading through mr. heins' comments, what do you glean from it? they're not open to the options here? >> well, no. he has to keep confidence, motivation on the troops up. that's very difficult to do right now. on the other, he has to explore options. he has the find some ways of surfacing value, trying to stave off any kind of issue he might have with cash flow so he's got a fine line to walk. that's what i think he's trying to do. >> from a cash flow perspective, peter, do you think the company is approaching a death spiral? how accurate are the claims the company's not in a death spiral? >> probably accurate but the issue of momentum is pushing him towards it. delay of blackberry 10 we think is absolutely a terrible delay. it's actually if you think about it from the initial launch date about a year delayed from the initial expectations so the
second or third delay bethink's the real issue and puts a lot of confidence or pushes a lot of confidence away from their platform. to other platforms and makes it so much more difficult for them to recover but the momentum is bad and putting them in to that death spiral. >> i'm curious, what's the most to characterize it for me the most-often asked question from the buy side of this company. >> what's the final outcome? who or what does it look like in six months? that could have an impact on microsoft, google or apple and the takeaway is ap sl a horse to beat and they have the best ecosystem and that's what this is boiling down to. >> if i'm the head of an i.t. department or enterprise department of a big company and looking to roll forward the next year's budget, i mean, am i already thinking apple whereas i might not have been prior to the quarter or the recent statements?
>> i think you are. you have to be prepared for that. any good i.t. manager and talking to them, that's how they're thinking. the momentum is as i said pushing them in to that really bad situation. and that's the issue. and every i.t. manager we speak to has contingency plans. >> with various projections, i heard one year, two years to run out of cash, do you think that factors in the natural contraction with i.t. managers deciding away from rim android or iphone with concerns of the company? is that part of the projection? >> yes and no. on the one hand, i.t. manager haves to worry about that and most feel comfortable that no matter what rim looks like or the service looks like next one or two years someone is probably going to pick it up. so the issue of service interruption is probably low and the more important event is what are your users asking for? what applications do you want to use? on that front, apple is winning
and the security that apple's providing is so much better than in some cases on par. so the real challenge for rim is to try to differentiate, give a reason for folks to stick with them. and potentially try and find a way out of this. >> peter, last quick question. if apple picks up a certain potential of rim's users, have you done the math of what that could mean for apple? >> yes, we have. for every 2 million iphone additional iphone users they get, that could be upwards of a dollar of earnings as the enterprise-type user so this is potentially a huge opportunity for apple. we think it could be a big deal. and we think they're the horse to beat in the enterprise, as well. we think it's a big boon for apple. >> a dollar in earnings for every additional iphone. >> 2 million iphones. >> for every 2 million iphones. >> glad i clarified that. thanks for your time.
>> pleasure. >> peter misek of jeffries. home builder index rallying 16% just in the last year alone. earnings from kb home and lennar adding to optimism recently. but are we really talking about a true housing recovery? we're going to trade the home builders next. mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation.
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ecb meeting. with concerns about slowing growth in china, could investing in the u.s. give your portfolio an advantage right now? cnbc's bertha coombs is looking at the performance of all american companies, essentially those that derive most if not all of their profits here in the good old u.s. of a. >> that's right. we screen for firms that you didn't find any of those companies in the top 20 but we found about 120 companies in the s&p that fit the bill. deriving more than 98% of their sales from the usa. this year, it has paid to be u.s. company focused. well, the ftse cnbc global 300 up about 6% for the year, the s&p 500, blue chipping up over 8.5%. all americarica 120 up about th same as the s&p 500. but the best performers in the group are in the sectors that
are boosting gains here at home. take a look at the top ten. not all of them up today and pulte home. if you managed to invest $100 in each of these 10 had been that lucky at the beginning of the year you would be up nearly 49% right now than that -- 1,000 worth around $1,500 at the home. home builders like pulte among the leaders, best performing sector in the group and seen more encouraging data on housing, the banks done pretty well, as well. in fact, if you look at the sector that is drove the s&p in the first half, some of the best performers like telecom are defensive and get most of the revenues from the u.s. consumer. and in fact, today, though, they're down giving up a little bit. consumer discretionary, normally think of risk off times not doing so well but the u.s.
consumer held up pretty well and a sector that's fairly strong. the other big standout and counter intuitive in turbulent times is the financials. they're up more than 13.5% year to date. and banks overall have been the best performers up about 17%. 7 of the top 20 all-american stocks are financials and they're led by the regional banks. as their bad debt reserves have come down and the housing market started to stabilize the stocks have seen some major gains in the first half. regions financials up 59%. suntrust, b b&t, some of the best performers in terms of regional banks. will it continue, carl? that's the big question. there's no simple formula in looking at what's going to succeed here, especially when wefr a lot of tumultuous times ahead. >> interesting way to frame it through the eyes of the u.s. thanks so much. speaking of housing stabilizing, new 52-week highs
today and showing strength. is the recovery well on the way? the home building analyst and joins us this morning from new york. thanks for being here. >> thank you for having me. >> you think there's more in the trade and say housing is not immune to macro turmoil. how much more runway is there? >> well, the home builders long term are a great play on housing recovery over a multi-year period. the strength so far this year has been surprisingly strong. we have been bullish and above what we have expected so the housing recovery back to normalization trade is finally here. however, if we start to lose jobs in the second half of the year, housing is not going to be immune to that and could see a bit of a dent. >> the under-over on jobs that's critical, where is it? growth just plain job growth period or is there some number
that would account for new entrants and so forth? i would put the over-under at the muddle through job growth rate of 100,000. if we muddle through, housing recovery will continue. >> on one hand you say you look at price to earnings, valuations highly optimistic. a different metric, valuations are pessimistic. can you explain some of that. >> sure. well, you have to look at the builders on a price to book basis. builders unlike most companies in the s&p are more like land funds than traditional enterprise so on a price to book basis, they're at about 1.6 times. the range is between 1 and 2 times. so they're not really that optimistic or fully pricing in a robust recovery yet and also you have to add to that if they generate earnings, we estimate about 15% or 20% over the next 12 to 18 months and boost the stocks, as well. >> i wanted to focus in on the
higher end home builders. there was a research report of citigroup with the notion that higher income people are more sensitive to stock market volatility and we will be in for a period of stock market voluntarility tillty in the back half of the year. does that apply to higher end builders like toll brothers with the super luxury developments going on? >> you would have thought so but what's interesting is over the past couple of weeks there's no slowdown in housing momentum even at the higher end. we were speaking to toll brothers a week or two ago and they were saying that the momentum continued in to june and that's surprising because their customer group buying much more expensive homes, you would think more sensitive to stock market volatility. >> you have holds on kb, lennar and pulte. buys on toll and so forth. is there -- what separates the buys of the holds in your view? >> well, the basis for our recommendations is viewing the
home builders as land funds. the ones with the better balance sheets will have more money to invest in to a recovery and invest into a recovery. greater volume and eps. those are buys. >> an interesting year for that group. thanks for your time. good to see you. >> good to see you, too. >> still to come, the managing "drive." imf, christine laguardia in a first on cnbc interview. her take on the global economy, state of the united states and a lot more. first rick santelli, what have you got? >> i'll tell you what we're working on. on the mark, get set, pursuit of this camera. the entire santelli exchange today is going to be about the word pursuit and how it is at the epicenter in what, in my opinion, we need to fix with regard to the country and happy
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energy stocks on a move higher by $3.50 on wti, back about $1 buck a barrel for brent. we are seeing energy stocks for once lead the market higher. also take a look at material stocks. they are very strong. we have good trades in copper. take a look at alcoa, up 3%. cutting second quarter estimates, weak aluminum, alcoa reporting next week. that stock is sharply higher. keying off conversation about home builders, take a check on home depot as well as lows, a firm out with negative comments, slowdown in june, sharper slowdown at lowe's as opposed to home depot, underperforming, lowe's down 6%, home depot down 2.3%. >> meanwhile it is tweet time for tuesday. we're asking you in honor of america's birthday tomorrow, what do you get the u.s. for its 236th birthday?
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squawk on the tweet, tomorrow is fourth of july, 236th birthday of u.s. when declaration of independence adopted in 1776. this morning we're asking what would you get your country for its 236th birthday. matthew writes unfortunately for her 236th birthday, america needs to focus on getting back in shape. perhaps a stint on the biggest loser. a huge mattress to absorb the impact of the fall over the fiscal cliff. whatever warren buffett got for his 236th birthday. >> he's only 150. >> has the mind of 30-year-old. >> yes, he does. >> individual moves as we would expect on light volume week. >> interesting to know, talked to a trader, flat up basically for today's session. that's exactly what we have. we should continue to watch euro. saw that spike higher, short covering ahead of the ecb meeting. currency market deeper than other markets out there.
they will trade tomorrow around the world. that will be something to watch going into thursday. >> david, you'll be out the rest of the week. >> i am. >> watching because ecb and jobs will be a huge story. >> there's no doubt i will be tuning into my twitter account, of course, tuning into you and melissa. thank you, both. every morning watch and see what that number is about. very important. >> we'll talk more the other side of the holiday about what kind of impact barclays news might bring. picture is widening. >> story is growing. coming back to part of our conversation with mr. sonnenfeld, professor, i can't remember when you saw chairman, ceo and ceo of a company out unless the company had been criminally indicted. of course, that is not the case. fascinating story unfolding. >> have a great vacation, david. see you next weekend. enjoy. if you're joining us this morning, here is what you might have missed earlier on "today." >> announcer: welcome to hour three of "squawk on the street." here is what's happening so far.
>> the nation has no energy plan. now that the price has softened a bit, there's nothing coming out of the current congress, the white house, how we fix energy going forward. >> this is a margin of error race, a close election. i think governor romney is in really good position right now as the challenger to be able to mat case over the next number of months that he can win. >> he may be providing them information still on what is an ongoing investigation that barclays is the the only one that settled on so far. he feels perhaps they have been unfairly penalized as a result of having said, okay, we'll take the heat right now. >> i think lower interest rates, and continued low interest rates will prove positive to some of the financial institutions. the fed will have to keep rates low, put more reserves into the banking system. >> trading begins big board. >> general motors an increase of
15.5% of june sales. >> best sales month since september 2008 and probably what we're really most excited about is all of our sales divisions were up double digits for june. >> this might be the right answer to have come to this conclusion but this is premature now. it smacks of political and public relations effort to throw a body under the bus. >> good morning, welcome to third hour of "squawk on the street." let's get a check of markets on this shortened day before fourth of july who had. dow up 40 points, s&p up five, nasdaq up ten, pretty good numbers out of the three big auto companies in terms of june sales. of course, factory orders was a beat to the upside. oil jumping today west texas and brent up sharply. brent breaching the $100 mark for the first time since june 11th. the spike sending energy stocks like exxon and chevron higher. retailers making up biggest losers after chain store data sales came in flatter, versus 2%
increase the week before. forecast for sales trimmed as well. jcpenney, kohl's, macy's and target trading lower. barclays feeling pain from libor scandal. ceo announcing resignation, coo stepping down as well. we'll talk about what it means for your money. christine lagarde sits down for a first on cnbc interview. she'll give us her view on global economy, what she thinks of the state of the economy here in the u.s. . ubs making a bearish call cutting its call on the index by 100 points. we'll talk to the man who made the call and see why he's cautious. affecting the cost of your favorite glass of wine. how much more you'll pay for discount brands. all that and more in the next hour. start with corner office at barclays, bank ceo and coo
resigning in the wake of the libor manipulation scandal. talking about a story that involved first the top three managers of the bank and now including some of the regulators at the bank of england. kelly evans live in london with the latest on that. kelly, the story has been broadening very quickly. >> carl, it's just incredible. i've got documents in front of me barclays released head of the appearance tomorrow. here is a key example. barclays coo after meetings with regulators with the bank of england in 2008 concluded that an instruction had been passed down from the bank of england not to keep libor so high and therefore a direction to that affect to the submitters. i'll flash forward a couple of page here. barclays outlined contact with regulators going so far as to include a handy time line of all its various meetings. the message clearly seems to be with him stepping down with regulators, if this is what you
want, fine. but we're not going down without a fight. this sets the scene for explosive meeting tomorrow and shifts on us on regulators, bba. paul tucker the man in waiting to take over when the governor steps down next year. fascinating. >> absolutely fascinating. does it make sense why they would clean house internally only to point to regulators after the fact. >> have you to wonder why not release it sooner and see what happens. barclays has been dealing with other issues including executive pay, misselling of swaps. perhaps they felt pressure too much. perhaps bob diamond had reasons for hands up and walking away. the chronology is strange. >> kelly evans, the drama continues as we spend a day away from the markets.
more fallout from the barclays scandal and the rest of the sector an anton schutz, portfolio manager of two funds. anton, always good to talk to you. good morning. >> good morning. how are you? >> good. interesting turn with boe. what's going on. >> certainly lots of politics involved. certainly having an american run a large bank, who has been flamboyant, large bonuses. you never blame regulators. regulators are always nice. you have to play nice with them. look at the job they have done in the u.s. playing nice with the regulators and turning the image of the bank around. >> you think diamond did the right thing stepping aside. >> i think he did it right thing. he was a lightning rod. he's gotten into confrontations in the past. he's american over there. his style as investment banker, being a confident builder of the
investment banking, investment banking organization has flown in the face of british conservatism. >> sounds like you're weaving a lot of political -- this is interesting fourth of july, a story that involves americans and british. you think a lot of this had to do with the fact he wasn't one of them? >> well, that's part of it. let's not overlook the fact this was wrong and this impacted tremendous amount of contracts and money, you know, tied to trillions and trillions of dollars of derivatives and loans around the globe. it's going to take years and years to sort out who got impacted rightly, wrongly and where the damages lie. >> you don't own any of the shares but you obviously do business with barclays. you rely on research. is it clear to you how they restart this engine or outsider not in the top tier of management? >> i certainly think an outsider
makes sense. you want to bring in somebody who is not tied at all in any way, shape, or form. you've got to be careful. other companies implicated. not alone. i think there's more chips to fall. they really have to do a really great job in finding an outsider that's not going to have any ties to this scandal whatsoever. >> the fsa, bank regulator in the uk said the next libor settlement is going to come before the he said of the year. ostensibly the population of the players is going to get bigger. also i wonder what impact you think will be on the credibility of the bank of england. >> well, i think credibility is the entire industry has been called into question for quite sometime. i think certainly the credibility of bankers and regulators in the u.s. has been called into question for quite sometime. everybody here, people can do
wrong things but people are paid to watch them. both parties are culpable. >> incredible to watch in front of our very eyes. anton, thanks for coming to the phone. see you next time. >> take care. >> meantime markets gaining some ground, dow up 48. couple of strategists joining us this morning. one expecting markets to stay in a range, others betting on a possible upside surprise that could surprise bulls. want to bring in dan getner, ceo of rnc, getner capital management and jeff joins us as well. guys, good to see both of you. dan, what's your view? we've seen a bunch of different calls here. ubs brings down year end s&p target by 100 point. goldman says to short near-term, others say we could be missing the boat. what's going on? >> carl, we're just caught in a trading range now. we're just in purgatory until in essence we get clarity on the election, what's going to happen to europe, overall the domestic economy. we're stuck in a range where in
essence we have news flashes every day it's a no news or no big news environment. with that, where the earnings are now, that's the bad news. the good news is it's probably priced in. we're at a reasonable multiple. the downside is probably within 5 or 6%. with the types of earnings growth that we're having, we probably have another 4 to 5% of possibility between now and the end of the year. next year, if earnings do keep at a rate where we think we're going to be at 107, it really gives us in 2013 probably about 9% of upside. somewhat the bad news is, we don't see a tremendous amount of momentum here but slight positive push to the upside. that's going to give awe chance to really buy some stocks, especially those while you wait. >> yeah, jeff, you think judging from what commodities have done recently, what dollars have done, maybe that does give awe sign, recession possibility comes down, markets do better than we think. >> that's what i think. you've had recession scares the
past two summers, caused hiccups in the market of 17 and 20% in 2010 and 2011, a 10 or 11% hiccup here. it looks to me, if we can sustain where we are now, we're breaking out of the range we have been in. if you look at some of the dividend paying nonmarket correlated stocks like johnson & johnson and rainier timberlands and positive ratings from analysts they performed well in the three three or four weeks. >> jeff, would you stay with the safe bets, staples, telecoms, utilities or take a flyer on things beaten down, financials, industrials, so forth. >> i would. come out of 1366 which seems to have contained rallies over the past couple of months. looks to me like right now we're breaking out above that. i would argue if we stay up here through the balance of the day we're breaking out of the range to the up side. >> 1371, a level we had watched for so long, guys. finally, dan. you would avoid those materials,
those industrials. still think staples and health care are going to be the way to go. >> i think those are the way to go. you've got to have momentum in earnings. earnings is key here. visibility, integrity. i would agree, as i mentioned. i think we have enough strength and solidity at this level, you can go out and pick individual stocks. there is a lot of other sectors even as you get into energy sectors. companies like totale, they will provide a good dividend through this. >> thanks, guys. see where the day ends us today, dow up 52. want to get to cme in chicago. rick santelli on the day before the fourth of july with a special remembrance, celebration of america's birthday. hey, rick. >> absolutely. i tell you, i know it's tomorrow but i'm going to pretend it's today because you're not going to have this camera in front of me tomorrow. you know, 236 years ago today a document which most historians believe was drafted by thomas jefferson, although we don't
know if he wrote every single word, although we're going to assume he did was adopted by the second continental congress 236 years ago. but there's one phrase i want to pull out in particular, because that's what this santelli exchange is all about. so hopefully it will be on the screen. here is the phrase i'm talking about. it reads, "all men are created equal, they are endowed by their creator with certain inalienable rights, that among these are life, liberty, and the pursuit of happiness." and it's the word "pursuit" that i want to talk about specifically. you know, if you go on your computer and you look for synonyms i've done this, pursuit, you chase after something. the antenym, or the opposite is surrender or retreat. this is what i think thomas j r
jefferson was getting alt. in this country what makes us different we have the right to pursue whatever floats our boat, but we don't and shouldn't have any guarantees by anybody that you're going to catch it that you're going to catch it. it's the action of the chase, the ability to be in the game, the ability to do that that brought my grandparents here. nobody said, listen, if you come here, you can pursue happiness and we'll write you a guarantee that you're going to get it. you know, ronald reagan said an issue we need to worry about is reinstitutionalizing our greatness. do you know what he meant by that? education. we need to teach kids specific rituals. this is where our greatness is rooted, and i think on the education front we've failed a bit. i won't put them on camera but i've asked young kids just to
cite the pledge of allegiance. you know what the results were. happy birthday and another 200 years to add onto it. carl, back to you. >> fantastic message, rick. we'll talk to you in a little while. rick talking about the pursuit, not delivery of happiness. when we come back, managing director of the imf, christine lagarde. you don't want to miss it. back after a short break. e to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com.
>> organizations like the imf have become increasingly important to the economy. the managing director of the imf, first ever interview on cnbc. >> i'm with madam lagarde. thanks for joining us. i want to start with the report you're releasing on the u.s. economy. there are still considerable risks. tell me how you characterize what's happening in the u.s. right now. >> i would characterize it as tepid recovery would be my two words associated with two major downside risks. so the first downside risk is the domestic one, the one that policymakers can address if they want to. this is clearly the debt ceiling
and clearly the fiscal cliff. if those risks materialize, or if the threat of it grows, that could really number one erode confidence. number two, if they were to materialize, it could contract the u.s. economy that we see growing in 2012 at 2% and 2.3% in 2013. but if these risks were to materialize, it would reduce that growth to almost nothing. the second downside risk is the risk coming from the outside. that is the eurozone. deterioration of the situation in the eurozone area would be a risk to the u.s. recovery. >> i want to ask you, of course, about the eurozone, which you have been showing such leadership on in terms of the solutions there. on the fiscal cliff, very few people are expecting any agreement on certainly the fiscal cliff and debt ceiling issues before the election. are you saying they need to face
this now before the election, if not we will see a deterioration in economic growth? >> it would be far better, far better that it is addressed early on and before we get close to the risk. we think that the debt ceiling risk is likely to materialize early in 2013 and i'm sure the treasury department can use certain tools and mechanism to push the deficit cliff a little bit into 2013. if there was an agreement early on, it would be a serious confidence booster for the u.s. economy. >> madam lagarde, the eurozone, seems any headline coming out of europe really is moving markets all over the world particularly in the united states. you have spoken for a long time about the need to provide bailout money from this emergency stability mechanism, esm fund directly to the banks rather than going through governments. why is this so important? talk to us about what came out
of this latest brussels meeting which seems to have stabilized markets. is that what it was? money going directly to the banks? >> i think it's one very good reason for the movement that we've seen on the markets on friday and again on monday. the fact that the european stability mechanism set up by the eurozone partners can now invest directly into the capital of the spanish banks. it's not yet in the capital of any bank in need of restructuring or recapitalizing. it's been identified as the spanish bank in particular with the association of the sort of no senior creditor status associated with this. i think it's a combination of these two that helped spain enormously. but the direct investment from the esm into banks, without going through the sovereign, in other words without lending to
the country where the banks are located, i think it's a major improvement, because it really channels the funds directly to the banks where the needs are, where the risks are located without any contagion potential channel via the sovereign. >> i guess it's telling creditors and investors that they have the full support of the eurozone, the banking sector has the full support of the eurozone avoiding bank runs. would you like to see this approach put on all european banks, not just spanish banks. >> yes, absolutely. >> do you think we'll get there? >> my recommendation, our recommendation has been that the esm be allowed to actually do that in any restructuring of banks needed anywhere in the eurozone. we think it's a good use of that common pot of money. it avoids going through the sovereign. it does not affect the debt
ceiling of those countries, and it's a good multiplier, because if you invest in the capital of banks, number one, you restructure them. you might deal with the management. you might deal with the strategy. you certainly help in providing credit to the economy. >> how much capital would you say that the spanish banks need right now? >> we have said in our report that the needs are in the range of $40 billion euros. the sort of allowance that was given by the euro partners to spain is $100 billion euros. you have plenty of room to maneuver above what we think is necessary and what will be confirmed or informed by an independent auditor's report. >> this hinges on the idea we will have an overseer or regulator overseeing sector in europe of fmc type institution.
when do you expect that to be in place? >> that was tit for tat. we agree with ism regulation in banks provided there is a common european supervision with clear role for european central bank. that was the request of germany in particular. and it's terrific that from a strict monetary union, the eurozone is also moving into a banking union with one single supervisor who will have the authority to check what the national supervisors are continuing to do on a day-to-day basis. but that supervisor for the whole of the eurozone will have binding authority over what they do. >> madam lagarde, we're going to send it back to the studio. i know you've also had some opinions about what else the ecb can do in terms of this crisis. of course the european central bank meeting on thursday. i want to ask you about that as we continue our interview and that will be on the "closing bell." thanks for joining us for this portion of this live interview. christine lagarde live at the
imf. i'll send it back to you. we'll talk about ecb and upcoming meeting on closing bell eastern. back to you. >> maria, thanks so much. one more note, catch more of the interview with christine lagarde on the closing bell at a special time 1:30 p.m. on the east coast. counting down to the close in europe on if i have minutes and change, bringing closing action live when it happens. see how we trade the rest of the short system here. back in a moment. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. olaf's pizza palace gets the most rewards
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>> announcer: the >> announcer: the european markets are closing now. >> in fact, they are. a lot of green. european markets have a lot to think about, not the least of which is the broadening libor scandals involving barclays. take a look at how they finish their season. they trade even though the u.s. on holiday, dax up 77, ftse up 47. christine lagarde with the imf, a few headlines, fiscal cliff here, eurozone, said esm has plenty of ammunition, to paraphrase in terms of rescuing sovereign issues and the idea of
a eurozone bank supervisor in her words is terrific. don't forget ecb, of course, meets thursday morning. there's a look at euro intraday. saw a big spike an hour ago. lot of people suggesting shorts are covering because this will be the last chance stateside to trade some things european before that bank meets and announces at 7:45 thursday morning. mary thompson meantime at the floor of the nyc on a pretty interesting day, mary. look at s&p back above 1370. for a long time the line to watch. >> nicely above 1370 as well. i was looking at the chart at the euro, as the euro gone, so, too, the u.s. stock markets, dow closed, too as you see euro climbing. better than expected news on factory orders giving a lift to markets and good numbers on auto sales for the month of may. what we're seeing today basically is a rotation in leadership from yesterday's session. the material stock once again
front and center as investors expecting there could be global easing basically from central banks around the world. so that expectations or stimulus expectations from central banks around the world giving a lift to energy and materials, financials also looking strong. weakness, though, in telecom retailers as well as utility stocks, they are under pressure in today's session. all of this, of course, is reflected in crb index. we're also seeing gains in commodities including gold, oil as well as copper in today's session. what we're seeing, though, is weakness in retailing sector. there were disappointing numbers out for sales, up .2% below expectation keeping some pressure on retailers. among weaker performers japan pen, home depot and lowe's under pressure. home depot the biggest drag on the dow which continues higher, up 69 points.
interesting divergence health care group today, health care sector we follow is trading at just about an 11-year high right now. however, hmo stocks continue to fall, down three days in a row in the wake of supreme court's decision on obama care. that is the weak sector or weak spot in an otherwise -- >> okay. thanks very much. it was like radio with you for a minute there. thanks so much, mary thompson. let's get to rick santelli in chicago and get a farmers perspective on rising corn prices. rick. >> i have a nickname for matt, call him the gentleman farmer. it's an oddity down here these days, wasn't so much in the past, to see somebody who trades agriculture products and has the
fields to prove it. welcome, matt. what have you seen on your farm, you have 200 acres, you're grog concern in southwestern michigan. >> right now we're at a drought situation at my farm. we're looking at five and a half weeks without water. the corn is waist high, getting ready to tassel. we need water. >> there's been talk about drought conditions, that's huge. also heat. corn can deal with heat, needs moisture. you brought up a great point. we had some rain. did it accomplish what it's supposed to accomplish? >> yeah, it does and doesn't. the cost of the thunderstorms we get. we're not getting long all day rains we used to get. it's all in thunderstorms. you're getting hail, wind damage. quit down falls. the ground is so dry a lot of it runs off to begin with. >> rigidity, when you have a healthy cornstalk, it's rigid. these winds, stalks are weak.
you're telling me you're losing corn with this last thunderstorm. >> yeah. that's the cost. it's blowing it down. but then you need moisture to get it to regrow. ears end upset low to the ground. >> many viewers out there, myself included think being a farmer could be pretty darn profitable. 200 bushels per acre, how many times have you had that type of yield. >> one time. >> you've had even 100 bushels per acre. >> it was just in the last 10 years. >> viewers, do the math. how great a business is being a farmer. if you have one acre and the price is $7 and best you can do is 200 bushels per acre that's $1400 per acre. now, when i traded used to be $2 a bushel. you forward sold using futures markets at roughly five bucks an acre. what are your costs per acre. >> $450 to $500 an acre.
that's from an average yield. 100 to 130 on a bad year. >> your cost, actually with those numbers, biggest variable, your profit is less than your cost. >> farming you start at 100 opportunity. every rainstorm, every deer, everything that takes out of your farm takes away from your profit. drought takes a lot out of it. >> do you think the crop can still be made? the latest statistics yesterday didn't look good rating the crop. but they say 70% of the pollination process will occur in the next three weeks. time enough to make a good crop. >> countrywide we can -- >> what about yours in particular. >> mine i need rain in the next week if i'm going to have a good crop. i'm looking at potentially less than 50 bushels an acre. >> switch gears market side, trading side. do you think the market has it right at these prices. >> yes. >> close to k7, december corn new crop. you don't think this is
overplayed at all. >> no, not at all. >> if you had to guess right now, based on your own expertise, do you think we're going to be disappointed more than we are today when the final pollination information comes in over the next three weeks. >> i can't answer that completely because it's totally dependent on heat. if it's hot at night, a real problem. bottom line we need water bad or we're not going to get a good crop. >> you heard it from gentleman farmer matt. carl, back to you. >> thank you so much. microsoft submitting its latest, largest acquisition in the internet sector, worthless now. company says $6.2 billion charge to write down the value of the agency it bought in 2007. herb greenberg back at hq with more on that story. '07 not that long ago. >> not that long ago at all. this is a great story, carl. what's really interesting here, what we're starting to see appears to be a rise in the number of these really big goodwill impairment charges.
goodwill is the amount a company pays above an acquired company's goodwill value. gets impaired in the form of a noncash charge when the companies fess up they never grew into the price. deals done in the merger frenzy of all frenzies that ended in 2007 as the market peaked. we all remember that time. that's when companies were paying ridiculously high prices for anything not nailed down. with microsoft we're talking about that $6.2 billion goodwill impairment charge, $6.3 billion purchase of a company called aaquantive. then rio tinto on purchase of al can. then nyse on euronext.
then p & g on gillette. bit time the impairment occurs, nobody really cares. here is the bottom line, carl. there's so many impairments this time, don't be surprised if the rules wind up getting changed and managers and investors don't get off the hook so easily. >> i was going to ask you whether or not if the quarter ends up -- if the quarter ends up flat, right, on a nonoperating basis this charge is included, does that make you feel differently about the quarter? >> depends on the company. in the case of microsoft this could wife out quarterly earnings. equal to one quarter's earnings. people say noncash, one time, we don't really care. if it's a company really growing by acquisition in a really big way, then i think people start to care and question the model. >> just as the stock has been breaking out, too. pretty interesting. herb, thanks a lot. herb greenberg. send it back to hq, courtney reagan, microsoft having a
landmark day. >> shares of apple intraday, we did touch that $600 a day mark for the first time since april 27th, retreated back. up 1.2% double what s&p is now. market cap of apple sitting at $561 billion in six months. shares of apple up 46%. carl back to you. >> thanks so much, courtney reagan. straight ahead ubs haven't heard right now cutting year end target for s&p by 100 points. we'll talk to the man who made that cut and see why he's less optimistic, ubs chief equity strategist after this break. ♪ ♪ ♪ ♪ [ male announcer ] what's the point of an epa estimated 42 miles per gallon if the miles aren't interesting?
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find out how it can work for yours at thenewny.com. coming coming up at the top of the hour on halftime, should you bet on qe3 summer, the best strategy if big ben comes to the rescue. bank of america says the street is more pessimistic now than the financial crisis. why does b of a think it's time to buy? we'll explain. one of barron's top 20 financial advisers is our guest. carl, enjoy the holiday. we'll see you in 15 or so. >> see you later, scott. markets remain steady ahead of the holiday, four of the ten s&p sectors trading at multi-year highs. we've lost steam from the beginning of the year.
ubs now cuts 100 points off its year end target to 1370. jon than golub. you trim earnings expectations but you take a hacksaw to the target. why now? >> there's three things we've seen over the past couple of months but really the last week or so. the first thing is the economic data in the u.s. is broadly disappointing. you saw that with the most recent ism, but the last couple of months. not only things on the other side of the pond. it's starting to hit us over here. we're seeing analysts taking down estimates as a result. two things happened this week. the first one is the decision by the supreme court on health care. we think it makes the partisan debate worse. that is going to hurt the discussions about the fiscal cliff and debt ceiling at the end of the year.
things may move forward but they are going to hit a brick wall as we move to the latter part of the year. secondly, we think the statement by european officials last friday is not a panacea and ultimately this european stress is not going away and the market got that call wrong. >> yeah. a lot of people obviously on friday saw the glass a little more half full maybe than you are. you say the tone is becoming more contentious in europe among policymakers despite the summit. what did you see that made you less optimistic rather than more optimistic. >> i think there's a couple things. you saw the comments from finland. remember, finland were the folks who wanted to get special guarantees on their deal with greece going back a while ago. they are now not so optimistic about putting their capital to help out the folks in spain and elsewhere, so you saw it there. you can see the comments from german officials whether it be
merkel, we need this thing to be locked down, ironclad before we're going to go and release our capital. so is this a step forward in a marathon, sure. but it's a marathon and this thing is not going to be finished any time soon. >> some of the people who like to track your performance over the past few quarters point out you were pretty bearish in the spring. as the markets got better, you went more bullish. now you're turning tail, with a dramatic cut. how do you respond to the accusation your forecasts are a bit flailing? >> i think what we're seeing is last year you had a market that was flailing in the summer. it got bailed out by ltro around october when it was announced. that basically carried the market until around february. it's really hard to know when you get this burst of liquidity in the system. who knows, we can get some of
that in the short run now. but the half-life of these liquidity measures or these monetary policy initiatives is becoming shorter and shorter. so we've been somewhat cautious to believe that central banks can forever bail the system out. >> yeah. finally, jon, biggest risk to your forecast. i guess it's always possible some lawmakers come to the table earlier than we think. >> there's risks to the upside and downside. the market is -- this the number one question from investors, why are markets holding up so incredibly well given everything you're talking about, ultimately we all know, things are uglier in the economy, ugly in europe where we have a fiscal cliff. the risk is that the market basically continues to plow forward and under the circumstances some upside as well. we're just more cautious than we have been in the past. >> i'll tell you what at 1375 year end, it's going to be a flat second half with the s&p at
1373 and change today. that's a point and a half over the next six months. we'll see what happens. appreciate you coming to the phone, jon. >> my pleasure. >> have a great 4th. john golub. up next, if the glass of opinion on the go pino grigio, get used to it. back after a break. >> announcer: >> announcer: cnbc realtime exchange metrics snapshot, sponsored by interactive brokers. interactive interactive brokers, the professionals gateway to the world's markets. >> what do you want?
>> this summer you're going to need it. so why not carry it in style. here is your chance to win a water bottle signed by the "squawk on the street" gang. all you have to do is nail the number. if you can guess this friday's nonfarm jobs number, it's all yours. tweet us your guess @cnbcsquawkst and don't forget to use the #nailthenumber. you have to be at least 18 years of age, too. sorry, kid. for all the officials rules and detai details, go to sots.cnbc.com. now is your chance. "squawk on the street" will be right back. a small high school. the teacher that comes to mind for me is my high school math teacher, dr. gilmore. i mean he could teach. he was there for us, even if we needed him in college. you could call him, you had his phone number. he was just focused on making sure
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grigio. jane wells live in los angeles with more on that news. good morning, jane. >> hey, carl. unless this year's crop goes gang busters, even two buck chuck may have a hard time finding enough excess grape juice in california to sell on the cheap. >> last spring the weather was lousy. so the amount of grapes produced was down from normal. >> runs the group that invests in and operates napa vineyard. the wine grape falling two
years, western farm reports wineries believe they will be short on supply for five years while demand is up 10%. usually means one thing, higher prices. >> seems from a consumer standpoint we could move from a period of discounting to a period of shortage seemingly overnight. >> rob mcmillan, founder of silicon county bank's wine division says during the downturn farmers stopped planting new vines now demand bounced back. >> we're moving to a place where we've gone from a long position in inventory to short position and that changes the game. >> does that make wine a good investment now? the land may be a better investment than grapes. >> nothing safe about investing in a brand or being in the wine business. >> the best way to invest in wine is probably to drink it. >> here here. you can now drink some of the hardest wine to find, screaming eagle, the most exclusive wine in napa. you saw this in 2004 for sale,
took this pit at costco, the price a steal at $1774. doesn't look like it's in a temperature controlled cabinet. also, a story how chinese investors starting to buy up napa winery. that was $2,000, this is $2. >> i remember your two buck chuck stories from not too long ago. interestingly costco says those big ticket items people tend to not buy when they walk in. they will leave, come back, and then buy because they are thinking i'm not going to get that price anywhere else. >> how did you become the wine and spirits reporter by the way. what did it take to get on that beat. >> i've been working at this for years, carl. >> i know you have. have a great 4th. jane wells in los angeles. don't forget to tweet us. tomorrow is the fourth of july,
236th birthday for united states of america. we'd like to know what would you get your country for the 236th birthday. tweet us @cnbcsquawkst. we'll read answers after the break. but they haven't experienced extra strength bayer advanced aspirin. in fact, in a recent survey, 95% of people who tried it agreed that it relieved their headache fast. visit fastreliefchallenge.com today for a special trial offer. in your car. now count the number of buttons on your tablet.
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let's get let's get to "squawk on the street" tuesday morning. as you know 236 years ago tomorrow, united states of america adopted the declaration of independence. we're asking you all morning long, what would you get your country for its 236th birthday. a lot of good responses today. max writes, i would give lady liberty, 236 birthday spankings. that's already been taking. abraham lincoln ii but not a vampire. 4 hours of not worrying about europe's economic crisis. what a gift that would be. rick you have ideas of your own after your moving and important to watch tribute at the top of the hour today. >> i really think the notion of governments guaranteeing you happiness, it doesn't give you freedom, it takes your freedom away. what i would give the country for its birthday, a thank you card. my grandparents came here. i'm very lucky to do what i do for a living.
i worked hard at it. i pursued happiness. i've grasped a lot of it, thanks to the country. i hope the dynamic that made it possible for me will make it possible for my kids and their kids, but i don't see that as a trend. i understand things like entitlements and there's people that need help. entitlements is not a word that's in the constitution. we're very charitable people. the difference is that it comes from inside, not through legislation. back to the markets quickly, intraday chart, looks like rates are going up. yesterday, looks like we're going to be unchanged. look at the chart going back to june, pretty much we're going nowhere fasth rega to closing yields. i think that's important. credit markets haven't flinched. things aren't great on the international scene and credit markets telling you that won't change any time soon. >> short covering ahead of ecb thursday. percentage likelihood, rick,